Deposit growth overtook credit growth in the fortnight ended January 10, 2025, reversing the trend witnessed in the preceding fortnight. Deposit and credit growth too seem to be converging.
Deposits and credit of all scheduled banks grew by ₹94,794 crore and ₹60,856 crore, respectively, in the reporting fortnight, according to Reserve Bank of India’s Scheduled Banks’ Statement of Position in India.
Surge in deposits
Bankers attribute the pick up in deposit growth to organisations crediting salaries to employee accounts either month-end or the beginning of the month. With India Inc entering the last lap (quarter) of the current financial year, there is also demand for credit.
In the preceding fortnight ended December 27, 2024, while deposits nudged up just ₹3,225 crore, credit grew by a robust ₹1,60,237 crore.
Tanvee Gupta Jain, Chief India Economist at UBS Securities, opined that weaker public capex (due to general elections, heavy rainfall and regulatory delays) in the first half (H1FY25), tight monetary policy (real rates being in the top quartile of 10-year distribution) and slowdown in credit growth (largely on regulatory tightening toward unsecured consumer loans) weighed on domestic economic activity over the past year.
As on January 10, 2025, the year-on-year credit and deposit growth stood at 11.35 per cent and 10.73 per cent, respectively, with the gap narrowing to just 62 basis points from 710 basis points a year ago.